A panoramic photo of The Mombasa Port

Fears that Kenya’s strategic assets could be seized by the Chinese over Nairobi’s huge debt to Beijing have all been confirmed by Auditor General Edward Ouko’s report in which he warns that the foreigners could take over operations at the Kenya Ports authority (KPA) if the government does not meet its debt obligations.

The report, authored by F.T Kimani on behalf of Ouko, discloses that the port was used as collateral to acquire a Ksh227 billion loan from the China EXIM bank used to build the Standard Gauge Railway (SGR) and also warns that the authority’s revenue will be used to pay the loan if the Kenya Railways Corporation (KRC) does not meet its obligations as per the terms of agreement for the loan.

“Any proceedings against the lender would not be protected by sovereign immunity since the government waived it on KPA’s assets by signing the agreement. KPA’s assets are exposed,” reads the report, which was posted on social media Wednesday by former anti-graft czar John Githongo.

The Auditor General’s report shows that KRC’s operating revenue for the financial year ended June 2018 was Ksh 42.7 billion, a 7.9% increase from the Ksh39.7 billion it posted the previous year, the figures mean it is impossible that the project will break even by the time Beijing comes to collect.

It also paints a gloomy picture on the legal options available to Kenya in the event a dispute over the payment of the loan arises between the two countries.

“The agreement is biased since any non-performance or dispute with the China EXIM Bank would be referred to arbitration in China whose fairness in resolving the dispute would not be guaranteed,” reads the report.

In November, global credit ratings company Moody’s also warned that the Chinese could take over the Mombasa port.

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“Countries rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors,” read the rating.

Beijing has already taken over the Zambia National Broadcasting Corporation (ZNBC) over the African country’s failure to settle a Ksh27.5 billion debt .

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China, through Star Times, is in charge of the income wing at ZNBC because they have 60 per cent controlling stake in a special purpose vehicle called Top-Star which they are using to recover their loan.

“All business decisions at ZNBC apart from editorial policy, are under Chinese control which owns Star Times,” Zambia Observer, a respected Zambian publication reported on September 16, 2018.

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Samuel Gitonga is a senior reporter at BUSINESS TODAY. Email: [email protected]

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